Press Releases

Budapest, February 14, 2000

MATÁV (NYSE: MTA.N; BSE: MTAV.BU), the leading Hungarian telecommunications service provider, today announced another year of outstanding financial results.

Highlights:

• Revenues grew 21.0% (9.4% in USD and 15.4% in EUR terms) year-on-year to 384.9 billion forints, compared to 318.1 billion forints in 1998. Top line growth was driven primarily by above average increases in revenues from subscription charges (up 25.0%) and domestic traffic (up 23.7%). Our fastest growing business lines continued to be mobile telecommunications services (up 34.2%) and leased lines and data transmission services (up 35.2%).
• EBITDA increased 22.5% year-on-year to 183.3 billion forints compared to 149.7 billion forints a year ago. The EBITDA margin was 47.6% in 1999 versus 47.1 in 1998.
• Net income increased 34.8% (21.8% in USD and 28.5% in EUR terms), to 78.6 billion forints versus 58.3 billion forints, despite the fact that a five-year tax holiday ended in 1998 which causes MATÁV and Westel 900 to pay corporate taxes at a rate of 7.2%. Net income margin increased to 20.4%, compared to 18.3% in 1998.
• Basic earnings per share grew by 34.8% year-on-year to 75.8 forints.

Chairman and CEO Elek Straub, commenting on Matáv's 1999 financial results, said: "Matáv's strong performance in 1999 demonstrates the tremendous growth opportunities offered by the Hungarian telecommunications market. Consumer demand for mobile communications and data transmission is driving the pace of market change, areas where MATÁV already operates in a fully competitive environment. Importantly, these two lines of business were Matáv's two strongest performers, underscoring the company's strength as the market continues to liberalize."

Matáv's solid growth in 1999 was mainly attributable to strong increases in volume and an expanding customer base in fixed, mobile and data segments.

• The number of fixed lines increased 9.6% year-on-year to nearly 2.9 million. The number of ISDN lines jumped to over 114,000 from 63,000 in 1998 with a considerable increase in the number of residential users. As a result, a penetration rate of 38.6% at the end of 1999 was just shy of our 2000 year-end target of 40%.
• Growth in domestic usage, as measured in minutes, outpaced increases in the number of lines, with an 11.3% increase year-on-year. The main drivers of this growth were an increase in residential and ISDN traffic.
• In November 1999, we re-launched our voice-mail services on a completely new platform. In just 2 months, we received 65,000 new orders. Since the penetration of value-added services is currently low, we expect that voice-mail services will be a significant factor in substantially raising call completion rates.
• The mobile market experienced an eventful year with the introduction of GSM 1800 technology and the addition of a third GSM player. Our 51%-owned GSM provider, Westel 900, was able to maintain its leadership position with 55% share of the GSM cellular market. In addition to introducing new services (e.g. voice-over IP, Mailreader, SMS content), Westel 900 increased its customer base by 54.1% to over 842,000 subscribers. 63% of the net additions were in standard service and 37% in the prepaid segment. Consolidated revenues from mobile services increased 34.2% to 82.7 billion forints.
• In November 1999, MATÁV announced an arrangement with Deutsche Telekom, for the option to purchase the remaining 49% of Westel 900 and Westel 450. MATÁV can exercise the option between July 1, 2000 and September 30, 2001, at the fixed price of USD 885 million. This arrangement greatly strengthens Matáv's presence in the rapidly expanding mobile segment and represents a strong value creation opportunity for our shareholders.
• Growth in data communications continued unabated. Revenues from leased lines and data transmission products grew by 35.2% to 23.9 billion forints driven by considerable expansion of the number of managed leased lines which surged 35.5% from 5,170 to 7,007. Data revenues in 1999 contributed 6.2% of total revenues, compared to 5.6% in 1998.
• Matáv's internet service provider, MATÁVNet, experienced a dramatic rise in the number of dial-up subscribers, increasing 59.0% to 51,300 from 32,300. The increase was due to new and innovative marketing plans, such as and the prepaid NetQuick packages; as well as having the most competitive prices available in the Hungarian internet market.
• In 1999, MATÁV continued to increase operating efficiencies. We reduced headcount by 7.3% year-on-year while increasing lines per employee to 240 from 201 in 1998. In addition, we began to outsource property management and information technology functions. We expect outsourcing to result in improved service levels and efficiencies.